IRS Direct File, Year 2 | Johanna Ostrich

Discovery

Expanded tax scope

The target audience for Direct File remained the same in year 2: low- to middle-income working individuals, couples, and families with wage income.

Scope decisions were still based on our 4 criteria:

Prevalence—How many additional taxpayers would be eligible?
Complexity—What level of effort would be required to implement it?
Ease of explanation—Would it make it easier for taxpayers to self-identify as in- or out-of-scope?
Customer support—Would it impact the demand for customer support or implicate additional training needs?

We also had useful data from the pilot about what scope limitations taxpayers were finding the most confusing and what unsupported tax scope was most requested. For example, the team considered retirement income and Form 1099-R important but had not included it in the pilot due to complexity. During the pilot, support for retirement income was a top request. And multiple taxpayers incorrectly tried to report Form 1099-R in the Social Security benefits section, which led to an inaccurate return. Given its importance to taxpayers, and to ensure taxpayers use Direct File accurately, the team prioritized retirement income in year 2.

The team once again had a tight timeline, since we got approval to expand in May. We got to work identifying what scope made sense to add for filing season 2025. We largely chose more challenging tax items than the previous year, taking on some hefty scope like the Premium Tax Credit.

Direct File tax scope, filing season 2025
Basics
Form 1040 and 1040-SR Must be a U.S. resident Any filing status Dependents (claiming by non-custodial parents not supported) Language and accessibility preferences (Schedule LEP, Form 9000) Available in 25 states
Income
Wages Interest Unemployment compensation Social Security benefits Retirement income from employer-sponsored plans Dependent care benefits Alaska Permanent Fund Dividend
Deductions and adjustments
Standard deduction Student loan interest deduction Educator expenses deduction Health Savings Account deduction
Credits
Child Tax Credit and Credit for Other Dependents Earned Income Tax Credit Premium Tax Credit Child and Dependent Care Credit Retirement Savings Contribution Credit Credit for the Elderly or the Disabled Claiming credits after disallowance (Form 8862)

Direct File tax scope, filing season 2025
Basics	Income
Form 1040 and 1040-SR Must be a U.S. resident Any filing status Dependents (claiming by non-custodial parents not supported) Language and accessibility preferences (Schedule LEP, Form 9000) Available in 25 states	Wages Interest Unemployment compensation Social Security benefits Retirement income from employer-sponsored plans Dependent care benefits Alaska Permanent Fund Dividend
Deductions and adjustments	Credits
Standard deduction Student loan interest deduction Educator expenses deduction Health Savings Account deduction	Child Tax Credit and Credit for Other Dependents Earned Income Tax Credit Premium Tax Credit Child and Dependent Care Credit Retirement Savings Contribution Credit Credit for the Elderly or the Disabled Claiming credits after disallowance (Form 8862)

New functionality

Data import

The most exciting update to Direct File for filing season 2025 was data import. I didn’t work on this new functionality, but it’s too exciting not to talk about.

“If I’m going to the IRS website, I would assume they have the information already.”

—From a taxpayer user interview

Every year, taxpayers gather tax documents and manually enter that data on their return. This manual entry is burdensome and error-prone, and it can feel unnecessary because the IRS receives the same source documents. In our user research, taxpayers requested again and again that the IRS pre-populate information it already knows about them on their federal tax return. This functionality had never been feasible before, because the legacy systems don’t talk to each other, and the IRS had lacked the resources to modernize them. The newly-formed Direct File team set our sights on experimenting with this functionality.

Iterative approach

The team took an iterative approach and set modest goals to test the new system they were building (in collaboration with other IT teams across the IRS). It ended up performing very well, and the team rolled out multiple data import features to all Direct File users over the course of filing season 2025. Direct File offered the option of importing the following for the primary filer (the one who signed in and authenticated):

Biographical information like name, address, and date of birth
Identity Protection PIN (IP PIN)
Form W-2, Wage and Tax Statement
Form 1099-INT, Interest Income
Whether IRS records showed the taxpayer received Form 1095-A, Health Insurance Marketplace Statement

Taxpayers found data import to be easy-to-use, intuitive, and a welcome addition to Direct File. Some noted it saved them time. Others said it reminded them about a form they didn’t know they needed to report. Others looked forward to more income tax forms getting imported in the future.

Screen offering to import Forms W-2, with a modal explaining how the IRS knows this information — Direct File offers to import Forms W-2 for the primary filer

Limitations of imported data

We also learned a lot from this initial experiment, including about some limitations with the data the IRS has access to. For example, employers transmit Forms W-2 to the Social Security Administration (SSA), and only some of that data is then passed along to the IRS. This data is sufficient for IRS administrative purposes, but it isn’t complete for taxpayers filing their return. Also, a number of income tax forms like Forms 1099-INT and 1099-R aren’t due in digital form to the IRS until March 31. So data import can currently only be available for those forms at the very end of filing season.

Future opportunities with data import

There’s a huge opportunity for data import to transform the way taxpayers file their taxes. And the team is very excited about the implications of this new functionality, such as:

Importing all income tax forms in scope
Importing data that already lives in the taxpayer’s Online Account, like estimated tax payments
Using imported data to automatically detect tax situations Direct File doesn’t support, simplifying eligibility checking
Authenticating both filers on a joint return and importing tax forms for both
Reimagining the Direct File experience around data import, where the tool does a lot more of the heavy lifting

Screen showing basic biographical information for the user to review — Direct File offers to import basic biographical data about the primary filer

Design

My role on the team

The team added hundreds of new screens for the 2025 filing season, totaling some 700+ possible questions. (Though no taxpayer would ever see close to that many.) The overall structure of the tool stayed largely the same, with the same 5 main sections: You and your family, Income, Deductions and credits, Your 2024 taxes, and Complete.

In year 2, I worked exclusively on the Tax Logic team and expanded into more sections of the tool. I was design lead for:

Health Savings Accounts (HSAs)—Form 8889, the HSA deduction, and Forms 1099-SA
Credit for the Elderly or the Disabled—Schedule R
Interest income over $1,500—Schedule B
Information architecture (IA) for the Income section—now and in the future

I also consulted on the Retirement Savings Contribution Credit (Saver’s Credit) and retirement income (Forms 1099-R).

There’s a lot of scope to discuss here. I’d like to focus on 2 areas I found particularly interesting: HSAs and future opportunities for the Income IA.

HSAs

I was the design lead for HSAs, which are a type of tax-advantaged account. With an HSA, if you follow certain rules, you can set aside money pre-tax to pay for medical expenses.

HSAs are more complicated than the income types supported in the pilot, so they proved useful for testing how well our existing patterns scaled. We took an iterative approach—we built a minimum viable product (MVP) that supported simple HSA tax situations, tested it before and during the 2025 filing season, made incremental updates based on this research, and walked away with great user feedback that will guide continual, long-term improvements to HSAs and the expanding Income section.

What’s complicated about HSAs

The Direct File pilot supported income types that were relatively straightforward to report. The taxpayer receives an income tax form (like a Form W-2 or 1099-INT) that lists all the needed data, and then Direct File asks for that data. Reporting of HSAs is more complicated, because Direct File has to ask additional questions about how well the taxpayer followed the rules for adding money to the account (contributions) and taking money out of the account (distributions). These rules can be confusing, and answers to these questions aren’t marked on a form—the taxpayer just needs to know them. And since taxpayers often set-and-forget these types of accounts, the details can be challenging to recall.

Also of note, HSAs don’t fit neatly into 1 tax category. They best align with Income, but they don’t really feel like income, because the money usually isn’t going into the taxpayer’s pocket. For many taxpayers, HSA contributions or distributions won’t affect their federal tax return at all. It’s just something they need to report. But depending on their situation, HSAs can potentially affect Income or Adjustments or cause the taxpayer to owe Additional Taxes.

Forms 8889, 5498-SA, and 1099-SA — Forms for reporting HSAs

Adapting our existing patterns

Our existing patterns didn’t quite accommodate the contribution/distribution setup of HSAs. Structurally, we had 2 patterns for collecting information:

Question section—The taxpayer is asked a series of questions once, and needs to answer all of them.
Collection section—The taxpayer has the option to add item(s), like an income tax form. For every item they add, they loop through the same series of questions.

In the pilot, we didn’t mix these patterns in a single section.

I collaborated closely with engineers to find the right MVP approach to support HSA contributions and distributions. My initial design involved a new navigation page, which proved too disruptive for our first pass. So we opted for one long HSA section with contributions and distributions all together. We called it a Question section with a nested Collection. (What a mouthful.)

Our new hybrid pattern proved a little more cumbersome for engineering than expected, but it provided a good foundation for testing the structure for tax-advantaged accounts in Direct File. We were eager to learn how well this setup guided taxpayers, and where they still got confused. (HSA rules are confusing, so we expected some confusion.)

Diagrams showing how the Question section, Collection section, and Question section with nested collection hub are structured — We adapted our Question and Collection section patterns for HSAs

Designing HSA screens

Once we determined the structure of the HSA section, I got to work identifying what questions needed to be asked to accurately and completely fill out Form 8889, which is the attachment needed for HSAs. My responsibilities included:

Creating wireframes for the screens
Drafting copy for questions and contextual information
Consulting extensively with HSA experts at the IRS to make sure we were asking the right questions at the right time, and that these questions were as clear as possible
Coordinating with engineers and the product team to identify a feasible set of HSA situations to support for the 2025 filing season
Designing additional screens for more complex HSA situations to support in future years

In the end, I designed ~60 HSA screens for the 2025 filing season. These included questions to verify the taxpayer was following the rules of their account, plus a Collection hub to report HSA distributions (Forms 1099-SA).

Wireframes for the beginning of the HSA section, identifying which spouse (if any) needs to answer HSA questions — Wireframes for the beginning of the HSA section

Testing with taxpayers

We had an amazing team of researchers who gathered insights before and during filing season. I partnered with them to test the new HSA section. We learned a lot about where taxpayers got confused, especially around the rules for contributions. Some highlights:

High-Deductible Health Plans (HDHPs)—In order to contribute to an HSA, a taxpayer needs to be covered by an HDHP (among other criteria). We heard taxpayers found various parts of this rule confusing, including misunderstanding what an HDHP is.
Account owner—There can only be 1 account owner for an HSA, even though it’s common for multiple family members to use the account. We saw lots of taxpayers get confused by this, and try to report the same HSA for both them and their spouse.
Situations not supported by Direct File—It was challenging to communicate early on what HSA situations weren’t supported. We heard some taxpayers didn’t understand HSA rules well enough to self-identify as out-of-scope before getting started, which led to them starting returns they couldn’t finish with Direct File.

Thanks to our robust research-to-action pipeline, I was able to make content tweaks throughout filing season to address taxpayer questions. We could see from customer support chats that these updates resulted in fewer HSA questions, which was great. The research findings also helped me zero in on where taxpayers could use additional guidance with their HSAs. This was immensely helpful and gave me a lot to consider for future improvements.

Mockup of question screen about HSAs, with a new modal called 'Can an HSA have multiple owners?' — Based on user feedback, I added a modal to explain how HSA ownership works

Johanna embodies the Direct File team’s value to “do the hard work to make it easy.” She immerses herself in complexity only to return with a clarity of intent necessary to deliver an accessible, delightful user experience. In order to realize her vision, she collaborated confidently with IRS counsel and software engineers. The harder the problem, the more I’d want Johanna on the team.

—Chris Given, Direct File product lead

Future opportunities for the Income IA

The current Income section IA prioritizes a limited tax scope, and I always intended it for short-term use. At the moment:

Every income type gets its own section on the Checklist.
All income types are displayed for all taxpayers. (Exception is the Alaska Permanent Fund Dividend, which is for Alaska residents.)
Each income type unlocks 1 at a time, and taxpayers have to opt out of each one they don’t have.

This setup worked great for a small set of supported income types, but it’ll get too long and cumbersome as the tool continues to grow.

At the end of filing season 2025, I brainstormed with some teammates on how the Income section could adapt for new tax scope and functionality. Much of this ideation came from our recent learnings from HSAs and data import. I’d like to share a couple quick iterations I put together, which include lots of hypotheses and questions for further exploration.

Current income Checklist, with every income type displayed — The current Checklist is extra-explicit about what income Direct File supports

Separation of concerns

In filing season 2025, the Income section mixed straight reporting of data from an income tax form with challenging follow-up questions about complex tax situations. This makes the taxpayer jump back and forth between different mental models. And we heard taxpayers sometimes struggled with the challenging follow-up questions.

Hypothesis—It’ll be easier logistically (for taxpayers and engineers) if we separate concerns.

A section reserved for reporting standard taxable payments that (usually) come with an income tax form, like Forms W-2 and 1099-series. These will follow the Collection loop pattern, and could largely be filled in through data import.
A section for other tax situations that could affect your taxable income. This could include information on contributions and dependent care benefits. These sections require a higher burden on taxpayers to answer complicated questions and could use more space for careful guidance. Many of these questions will follow up on previously-reported data (like from Form W-2).

Outstanding questions:

How would this new categorization perform with taxpayers?
Would it be easier (or harder) for taxpayers to find things, especially if they go back to edit?
What’s the criteria for placement in the “other tax situations” spot?
How well would this scale for new tax scope (like Schedule C)?

Mock-up of revised Checklist, showing just Taxable payments and Additional income situations, plus a new sub-page that breaks down Taxable payments — A rough sketch of how the Checklist could separate concerns for Income

Customize income types for each taxpayer

Hypothesis—Direct File should customize the Checklist for each taxpayer, so they only see income types relevant to them. This could involve:

Having the taxpayer build their Income section
Integrating with data import, so we often already know they have an income type

For taxable payments, this would give taxpayers 1 place to opt in or out of all the income types. And an easy place to change their settings, if they need to add or remove an income type.

For other tax situations, this would help us identify if taxpayers have certain types of accounts, and then drill into more questions accordingly. It would also give us a place to acknowledge similar account types that don’t need to be reported, which we heard taxpayers find confusing.

Outstanding questions:

Big UI changes like this would require lots of usability testing. Would taxpayers understand this setup? Find it helpful?
How easily could they go back and update their answers?
Would the benefits of the shorter, customized Checklist be worth the more complex functionality?

There’s a lot of exciting potential for the expansion of Direct File, and I ended the filing season curious to dig deeper into these hypotheses and continue testing and refining with taxpayers.

Mock-up of builder screens for Income and Additional income situations, which have the user select which income types and accounts they have — Rough concepts for Income builder screens

IRS Direct File | Year 2

Year 2: Expanding scope and functionality

Project

My role

Team

Expanded tax scope

Our goal